I.

COMMERCIAL LAW

It is a phrase used to designate the whole body of substantive Habitual

jurisprudence applicable to the rights, intercourse, and relations of
persons engaged in commerce, trade, or mercantile pursuits. (Black’s
Law Dictionary)
Legal presumption of engaging habitually in commerce(A3)
It is that branch of private law which regulates the juridical relations
-exist from the time the person who intends to engage therein gives
arising from commercial acts.
announcement by means of circulars, newspapers, handbills, posters
It includes trade (business traffic within the limitations of the state) and exhibited to the public, or by any other manner whatsoever (e.g.
commerce (intercourse with foreign states). internet), of an establishment, the purpose of which is to conduct any
commercial transaction.

Commerce
 If you are to sell something you are not free to dispose, is the
It is the exchange of goods, productions, or property of any kind. It is contract of sale valid?
intercourse by way of trade traffic between different peoples or states
and the citizens or inhabitants thereof, including not only the purchase,  No; no ownership to transfer
sale, and exchange of commodities, but also the instrumentalities and
agencies by which it is promoted and the means and appliances by
which it is carried on, and transportation of persons as well as goods. Who are involved?
(Black’s Law Dictionary)
√ Merchants
It is that branch of human activity, the purpose of which is to bring
products to the consumer by means of exchanges or operations which
tend to supply and extend to him, habitually, with intent to gain, at the
Merchants (A1)
proper time and place and in good quality and quantity. (1 Blanco 36)
1. Those who having capacity to engage in commerce, habitually devote
themselves thereto.
Trade v Commerce
2. Commercial or Industrial associations organized in accordance with
Trade Commerce the Code of Commerce.

Trade is selling and buying of Commerce includes the

goods and services between exchange of goods and services Legal Capacity to habitually engage in commerce (A4)
two or more parties in along with activities viz.
consideration of cash and cash banking, insurance, advertising, 1. Those having reached the age of 21 years
equivalents. transportation, warehousing,
etc. to complement the 2. Those not being subject to the authority of the father or the mother
exchange. nor to marital authority

Wider in scope; continuous 3. Those having the free disposition of their property

Time is of the essence

Characteristics of Commercial Law

1. Universal
- shifting of values every second
-exists in every civilized society
- in business, time has a cost (time cost)
-commerce happens in all parts of the world
*equitableness
2. Progressive

-accumulates new ideas and keeps abreast with contemporary

development Commercial Law v Civil Law
-dynamic; always developing
Commercial Law Civil Law
-based on customs; always changing
Perfection From the moment From the moment
3. Equitable the offeree accepts the acceptance is
it; (Theory of made known to the
-involve the exchange of values or consideration Manifestation) offeror (Theory of
because time is of Cognition); it will
-uniformity; rules and regulations are the same with everybody the essence only bind the
under the same circumstances
offeror upon
knowledge of
acceptance
Fundamental Postulates of Commercial Law (assumptions believed to
be true) Designation of Obligation without If the obligation
Period a fixed period does not fix a
(To be a commercial transaction; for the application of commercial laws) demandable: period: action filed
in court to fix the
1. Habitual a) 10 days after period
perfection, if it gives
2. Time is of the essence rise to an ordinary
 action

b) on the next day, 3. Secs. 10 & 12, Art. XII

if it involves
- Filipino First policy and nationalization
immediate action
(A62) ARTICLE XII

Delay No need to demand Mora accipiendi, Section 10. The Congress shall, upon recommendation of the economic
for debtor to incur mora solvendi and planning agency, when the national interest dictates, reserve to
liability (mora ex re) citizens of the Philippines or to corporations or associations at least sixty
- failure to pay +
per centum of whose capital is owned by such citizens, or such higher
liability for such
percentage as Congress may prescribe, certain areas of investments. The
delay; “in default”
Congress shall enact measures that will encourage the formation and
Retraso operation of enterprises whose capital is wholly owned by Filipinos.

- failure to pay on In the grant of rights, privileges, and concessions covering the national
time but no liability; economy and patrimony, the State shall give preference to qualified
“mere delay” Filipinos.

√ There must be The State shall regulate and exercise authority over foreign investments
demand for liability within its national jurisdiction and in accordance with its national goals
to exist and priorities.

Section 12. The State shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, and adopt measures that
Constitutional Provisions on Commercial Law help make them competitive.

1. Sec. 1, Art. XII and Secs. 19 & 20, Art. II

- Economic nationalism as constitutional Policy on national economy and 4. Sec. 1, Art. VIII
commerce
- Power of judicial review in key economic and commercial matters

ARTICLE VIII
ARTICLE XII
Section 1. The judicial power shall be vested in one Supreme Court and
Section 1. The goals of the national economy are a more equitable in such lower courts as may be established by law.
distribution of opportunities, income, and wealth; a sustained increase in
the amount of goods and services produced by the nation for the benefit Judicial power includes the duty of the courts of justice to settle actual
of the people; and an expanding productivity as the key to raising the controversies involving rights which are legally demandable and
quality of life for all, especially the under-privileged. enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part
The State shall promote industrialization and full employment based on of any branch or instrumentality of the Government.
sound agricultural development and agrarian reform, through industries
that make full and efficient use of human and natural resources, and
which are competitive in both domestic and foreign markets. However,
the State shall protect Filipino enterprises against unfair foreign
competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of II. LETTER OF CREDIT
the country shall be given optimum opportunity to develop. Private
enterprises, including corporations, cooperatives, and similar collective (LC, documentary credit)
organizations, shall be encouraged to broaden the base of their
(Code of Commerce Articles 567-572)
ownership.

ARTICLE II
Governing Law
Section 19. The State shall develop a self-reliant and independent
national economy effectively controlled by Filipinos. √ Uniform Customs and Practices (UCP)

Section 20. The State recognizes the indispensable role of the private -adopted by the International Chamber of Commerce (ICC)
sector, encourages private enterprise, and provides incentives to needed
investments. -first established in 1933

2. Secs. 9 & 10, Art. II Definition

- Equitable distribution of wealth
ARTICLE II
Section 9. The State shall promote a just and dynamic social order that
will ensure the prosperity and independence of the nation and free the
people from poverty through policies that provide adequate social
services, promote full employment, a rising standard of living, and an
improved quality of life for all.
Section 10. The State shall promote social justice in all phases of national
development.
It is a letter issued by one merchant to another for the purpose of
attending to a commercial transaction (Art. 567, Code of Commerce)
It is an engagement by a bank or other person made at the request of a
customer that the issuer will honor drafts or other demands for payment
upon compliance with the conditions specified in credit Through a letter
of credit, the bank merely substitutes its own promise to pay for the
promise to pay of one of its customers who in return promises to pay the
bank the amount of funds mentioned in the letter of credit plus credit or
commitment fees mutually agreed upon. (Prudential Bank vs. IAC GR no
74886 December 8, 1992)
It is a financial device developed by merchants as a convenient and 2. That it be limited to a fixed and specified amount or to one or more
relatively safe mode of dealing with sales of goods to satisfy the undeterminable amounts but within the maximum limits of which has to
seemingly irreconcilable interests of a seller, who refuses to part with his be stated exactly.
goods before he is paid, and a buyer, who wants to have control of the
goods before paying. To break the impasse, the buyer may be required to 3. Duration
contract a bank to issue a letter of credit in favor of the seller so that, by
a. 6 mos. if used in the Philippines or
virtue of the letter of credit, the issuing bank can authorize the seller to
draw drafts and engage to pay them upon their presentment b. 1 year if used abroad,
simultaneously with the tender of documents required by the letter of
credit. The buyer and the seller agree on what documents are to be Unless the parties provide for a different period.
presented for payment, but ordinarily they are documents of title
evidencing or attesting to the shipment of the goods to the buyer. Once
the credit is established, the seller ships the goods to the buyer and in the  It becomes VOID in fact and in law when it is not used within the
process secures the required shipping documents or documents of title. period agreed upon or within the duration aforementioned as
To get paid, the seller executes a draft and presents it together with the provided by law.
required documents to the issuing bank. The issuing bank redeems the
draft and pays cash to the seller if it finds that the documents submitted
by the seller conform to what the letter of credit requires. The bank then
obtains possession of the documents upon paying the seller. The
transaction is completed when the buyer reimburses the issuing bank
and acquires the documents entitling him to the goods. Under this
arrangement, the seller gets paid only if he delivers the documents of
title over the goods, while the buyer acquires the said documents and
control over the goods only after reimbursing the bank. (Bank of America
vs. CA GR no. 105395 December 10, 1993)

Stages

1. Contract of sale between the buyer and seller

2. Application for LC by the buyer with the bank

3. Issuance of LC by the bank

Three (3) Relationships
4. Shipping of goods by the seller
1. Contract of Sale
5. Execution of draft and tender of documents by the seller
Buyer and Seller
6. Redemption of draft (payment) and obtaining of documents by the
2. Commercial Credit Agreement
issuing bank
Buyer and Issuing bank
7. Reimbursement to the bank and obtaining of documents by the buyer
3. Letter of Credit

Bank and Beneficiary (seller)

Nature of letters of credit

1. It is an accessory contract.
Parties to a LC
2. It is NOT a negotiable instrument because it does NOT have all the
requisites of negotiability. 1. Buyer/importer/applicant

What characterizes letters of credit, as distinguished from other a. procures the letter of credit and
accessory contracts, is the engagement of the issuing bank to pay the
seller once the draft and the required shipping documents are presented b. obliges himself to reimburse the issuing bank upon receipt of the
to it. In turn, this arrangement assures the seller of prompt payment, documents of title.
independent of any breach of the main sales contract. (Ibid)
2. Issuing/opening bank

a. issues the letter of credit and

Essential conditions of a letter of credit (A568)
b. undertakes to pay the seller upon receipt of the draft and proper
1. That it be issued in favor of a definite person and not to order documents of titles and to surrender the documents to the buyer upon
reimbursement.
3. Seller/exporter/beneficiary Documents tendered by the seller/beneficiary must strictly
conform to the terms of the LC. They must include all the documents
a. in compliance with the contract of sale ships the goods to the buyer required by the letter of credit. (Feati Bank vs. CA, April 30,1991).
and
A correspondent bank which departs from what has been
b. delivers the documents of title and draft to the issuing bank to stipulated under the letter of credit acts on its own risk and may not
recover payment thereafter be able to recover from the buyer or the issuing bank the
money thus paid to the beneficiary. (Ibid.)
4. Advising/notifying bank
-no contract between the bank and seller; but still, the bank is
Correspondent bank of the opening bank through which it advises the
obligated to look into the documents submitted by the seller to check
beneficiary of the letter of credit
compliance
NOT liable for a breach of the LC; bound only to check the apparent
-documents tendered by the seller/beneficiary must strictly
authenticity of the LC
conform with the LC
5. Confirming bank
-bank cannot remove any requirement
Bank which confirms the LC issued upon the request of the beneficiary

Liable for a breach of the LC

6. Paying bank
Bank on which the drafts are to be drawn, which may be the opening
bank or another bank NOT in the city of the beneficiary
7. Negotiating bank
Bank in the city of the beneficiary which buys or discounts the drafts
contemplated by the LC, if such draft is to be drawn on the opening bank
or on another designated bank NOT in the city of the beneficiary
3. EXC: Rule on Fraud Exception (to be exempt from the first 2 rules)
It provides that the untruthfulness of a certificate accompanying a
demand for payment under a standby letter of credit may qualify as
fraud sufficient to support an injunction against payment. (Transfield v.
Luzon Hydro, G.R. No. 146717, Nov. 22, 2004)
-Fraud: intentional misrepresentation made by a person which
induce another who believed such and caused damage to the latter
-issuing bank is not obligated to issue LC when there is fraud by
the seller

-Test (how to detect fraud): whether standing on the shoes of the

Rights and Obligations of Parties bank, the fraud is clear and obvious

-buyer can refuse payment; bank pays frauding seller at its own
risk

Importance of LC to Seller
Types of LC
1. Globalization
1. Standby LC
- tool/medium for the seller to be assured of payment
2. LC On Sight
2. To benefit form the expertise of the bank
3. LC on Term/Usance
3. Opens the door for financing opportunities
4. Revocable LC
4. Assurance of payment
5. Irrevocable LC

6. Confirmed LC
Importance of LC to Buyer/Importer
7. Unconfirmed LC
1. Assurance that payment will only be made if the docs are
delivered to the buyer 8. Red Clause LC

*Rule of Strict Compliance 9. Transferable LC

2. Control of shipment dates

3. Cash resources are _______; leeway, no cash at the beginning Standby Letter of Credit

-a bank-issued option on a loan under the terms of which, the beneficiary

has the right to “take down the loan” if the account party (party
Rules in LC
requesting for the issuance of SLC) fails to meets its commitment, in
1. Independence Principle which case the issuing bank disburses a specified sum to the beneficiary
and books an equivalent loan to its customer, account party.
The bank determines compliance with the letter of credit only by
examining the shipping documents presented; it is precluded from -contract of loan
determining whether the main contract is actually accomplished or not.
-may support any financial obligation other than a COS
(Bank of America supra)
- v. ordinary LC: primary consideration is COS
*LC is independent of the breach of the main contract of sale

- bank is not obligated to check on the details of the COS

Letter of Credit on Sight

- pay beneficiary upon presentment

2. Rule of Strict Compliance
Letter of Credit on Term/Usance

-pay beneficiary on a future date as established on COS

Revocable Letter of Credit

-can be cancelled/amended anytime before payment; ensures payment

-it is intended to serve as a means of arranging payment but not as a

guarantee of payment

Irrevocable Letter of Credit

-obligates the issuing bank to honor drafts drawn in compliance with the
credit and can neither be cancelled nor modified without the consent of
all parties, including the beneficiary

Confirmed

-issued by one bank can be confirmed by another, in which case both

banks are obligated to honor drafts drawn in compliance with the credit

-both the confirming and issuing bank are guaranteeing payment

 akin to a loan but different rules; e.g. bank retains ownership
-carries the obligation of another bank located in the beneficiary’s
 Like SSS Law, also with penal provision
country giving assurance to beneficiary

Purposes
Unconfirmed
1. To encourage and promote the use of trust receipts as an additional
-carries only the obligation of the issuing bank
and convenient aid to commerce and trade
-a mere advising bank is not guaranteeing a credit
2. To regulate trust receipts transactions in order to assure the protection
of the rights and the enforcement of the obligations of the parties
involved therein
 Letter of Credit is non negotiable but the draft may be negotiable
3. To declare the misuse or misappropriation of goods or the proceeds
realized from the sale of goods released under trust receipts as an offense
punishable under A.315 of the Revised Penal Code

4. To punish the dishonesty and abuse of confidence in the handling of

Red Clause Letter of Credit
money or goods to the prejudice of another regardless of whether or not
-incorporates a clause(traditionally written in red) which authorizes the the latter is the owner
bank acting as negotiating/paying bank to pay the beneficiary as advance
(to be deducted from the total amount due)
Other purposes

1. In the case of goods or documents

Transferable Letter of Credit
-allows the beneficiary to act as a middleman and transfer his rights in a
letter of credit to another person (e.g. supplier of goods) who will receive
payment
-can only be transferred once! (because LCs are non negotiable)
a. To sell the goods or procure their sale;
b. To manufacture or process the goods with the purpose of ultimate sale
(here the entruster shall retain its title over the goods whether in its
original or processed form until the entrustee has complied fully with his
obligation under the trust receipt) or

c. To load, unload, ship or transship or otherwise deal with them in a

manner preliminarily or necessary to their sale

2. In the case of instruments

a. To sell or procure their sale or exchange; or

III. TRUST RECEIPTS b. To deliver them to a principal; or

c. To effect the consummation of some transaction involving delivery to a

depository or register; or
Governing Law
d. To effect their presentation, collection or renewal
√ PD 115 (29 Jan 1973)

Definition
-commercial document whereby the bank releases the goods in the
possession of the entrustee but retains ownership thereof while the
entrustee shall sell the goods and apply the proceeds for the full
payment of the liability to the bank.
It is a security transaction intended to aid in financing importers and
retail dealers who do not have sufficient funds or resources to finance the
importation or purchases of merchandise, and who may not be able to
acquire credit, except through utilization, as collaterals, of the
merchandise imported or purchased.
Trust Receipt Transaction (Sec 4)
It is any transaction by and between an entruster and entrustee, whereby
the entruster, who owns or holds absolute title over certain specified
goods, documents or instruments, releases the same to the possession of
the entrustee upon the latter’s execution and delivery to the entruster of
a trust receipt wherein the entrustee binds himself to hold the designated
goods, documents or instruments in trust for the entruster and to sell or
otherwise dispose of the goods, documents or instruments with the
obligation to turn over to the entruster the proceeds thereof to the extent
of the amount owing to the entruster, or the goods, documents or
instruments themselves if they are unsold or not otherwise disposed of.
Security Interest
-a property interest in goods, documents or instruments to secure
performance of some obligations of the entrustee or of some third
persons to the entruster and includes title, whether or not expressed to
be absolute, whenever such title is in substance taken or retained for
security only.
Obligations of Entrustee
1. Entragarla - deliver the proceeds
2. Devolvera - return unsold goods
*alternative
*no transfer of ownership; entrustor retains ownership
Failure to return/deliver
- intent to defraud is presumed
-mala prohibita; good faith is not a defense
*Land Bank v ACDC
Parties
1. Entrustee
- Borrower/buyer/importer
- person having or taking possession of goods, documents or instruments
under a trust receipt transaction, and any successor-in-interest of such
person for the purpose(s) specified in the trust receipt agreement
- owner of the goods purchased
2. Entruster
- Lender/financier
- person holding title over the goods, documents, or instruments subject
of a trust receipt transaction and any successor-in-interest of such person
- mere holder of security interest and NOT the owner of the goods
Security Interest – a property interest in goods, documents or
instruments to secure performance of some obligation of the entrustee or
of some third person
Seller of the goods is a party to the contract of sale with the
buyer/importer, NOT a party to the trust receipt transaction
Rights of the parties
A. Entrustee (Borrower/Buyer/Importer)
1. To receive the surplus from the public sale
2. To have possession of the goods as a condition for his liability under
this law
B. Entruster (Lender/Financier)
1. The entruster shall be entitled to the following:
a. Proceeds from the sale of the goods, documents or instruments
released under a trust receipt to the entrustee
b. Return of the goods, documents or instruments in case of non-sale and
c. Enforcement of all other rights conferred on him in the trust receipt
provided such are not contrary to the provisions of this decree.
2. May cancel the trust and take possession of the goods, documents or
instruments subject of the trust or of the proceeds realized therefrom at
any time upon default or failure of the entrustee to comply with any of
the terms and conditions of the trust receipt; or
3. On or after default, give notice to the entrustee of the intention to sell,
and may, not less than 5 days after serving or sending of such notice, sell
the goods at a public or private sale, and the entruster may, at a public
sale, become a purchaser.
4. The entruster’s security interest in goods, documents or instruments
pursuant to the written terms of a trust receipt shall be valid as against
all creditors of the entrustee for the duration of the trust receipt
agreement.
5. The entruster holding a security interest shall NOT, merely by virtue
of such interest or having given the entrustee liberty of sale or other
disposition of the goods, documents or instruments under the terms of
the trust receipt transaction, be responsible as principal or as vendor
under any sale or contract to sell made by the entrustee.
 Right of purchaser in good faith
Any purchaser of goods, documents or instruments, who buys such for
value and in good faith from the entrustee, acquires said goods,
documents or instruments free from the entruster’s security interest.
Two Features of Trust Receipt Transaction
1. Loan - entruster is the one who buys form the seller
2. Security - goods are collateral
*but still the loan is not the same as mutuum(there is transfer of
ownership); can be levied
A trust receipt transaction distinguished from:
(a) A pledge-in a pledge, the person doing the financing has possession
of the property; in a trust receipt,
the property is in the possession of the person financed
(b) A conditional sale-in a conditional sale, there is a sale of the property
from the seller to the buyer; in a trust receipt, there is no sale of the
property from the entruster to the entrustee
(c) A chattel mortgage-a chattel mortgage involves the creation of a lien
upon the property; a trust receipt does not involve the creation of a lien
(d) A consignment-in a consignment, the consignor retains title to the
property to secure the indebtedness due from the
consignee; in a trust receipt, the seller does not retain title to the property
but transfers such title to the entruster, not to the entrustee
Obligations of the parties
A. Entrustee (Borrower/Buyer/Importer)
1. Hold the goods, documents or instruments in trust for the entruster
and shall dispose of them strictly in accordance with the terms and
conditions of the trust receipt;
*may include manufacturing
*entruster retains ownership of goods whether in original or processed
form
2. Receive the proceeds in trust for the entruster and turn over the same
to the entruster to the extent of the amount owing to the entruster or as
appears in the trust receipt;
3. Insure the goods for their total value against loss from fire, theft,
pilferage or other casualties;
*how much can it be insured?
4. Keep said goods or proceeds thereof whether in money or whatever
form, separate and capable of identification as property of entruster;
5. Return the goods, documents or instruments in the event of non-sale
or upon demand of the entruster; and
6. Observe all other terms and conditions of the trust receipt not contrary
to the provisions of this decree.
B. Entruster (Lender/Financier)
1. Give possession of the goods to the entrustee; and
2. Give at least 5 days notice to the entrustee of the intention to sell the
goods at an intended public sale
Liabilities of the parties
A. Entrustee (Borrower/Buyer/Importer)
1. CIVIL:
a. Liability for loss
Loss pending their disposition, irrespective of whether or not it was
due to the fault or negligence of the entrustee, shall not extinguish his
obligation to the entruster for the value thereof.
*Risk of Loss borne by entrustee (Sec 10)
b. Liability for damages under A.33 of the NCC; no need of proof of
intent to defraud (PD 115 is mala prohibitum)
*mere failure to deliver or return
*damage to entruster need not be proven
2. CRIMINAL: Estafa (Sec 13)
If there is failure on the part of the entrustee to turn over the proceeds
of the sale or to return said goods, documents or instruments if they
were not sold or disposed of in accordance with the terms of the trust
receipt.
If a corporation, partnership, association or other juridical entities
commit the violation; the penalty shall be imposed upon the directors,
officers, employees or other officials responsible for the offense.
The breach of obligation under a trust receipt agreement is separate
and distinct from any criminal liability for misuse and/or
misappropriation of goods or proceeds realized from the sale of goods,
documents or instruments released under trust receipts, punishable
under Sec.13 of the Trust Receipts Law in relation to A.315(1)(b) of the
RPC. Being based on an obligation ex contractu and not ex delicto, the
civil action may proceed independently of the criminal proceedings
instituted against petitioners regardless of the result of the latter.
(Sarmiento, Jr. vs CA, December 27, 2002)
B. Entruster (Lender/Financier)
NO liability under any sale or contract to sell made by the entrustee
 Constitution: No one is to be imprisoned for nonpayment of debt v
PD 115; is PD 115 a violation of the constitutional provision?
√ No. The Trust Receipts Law is a declaration by the legislative authority
that, as a matter of public policy, the failure of a person to turn over the
proceeds of the sale of goods covered by a trust receipt or to return said
goods if not sold is a public nuisance to be abated by the imposition of
penal sanctions. (Tiomico vs. CA, March 4, 1999)
√ Commercial laws are exceptions
Public sale of the goods by the entruster
1. Notice of the sale shall be deemed sufficiently given if in writing, and
either personally served on the entrustee or sent by post-paid ordinary
mail to the entrustee’s last known address.
2. The proceeds of such sale, whether public or private, shall be applied
to the following:
a. Payment of the expenses thereof;
b. Payment of the expenses of re-taking, keeping and storing of goods,
documents or instruments;
c. Satisfaction of the entrustee’s indebtedness to the entruster.
3. Excess/Deficiency
a. Excess (surplus) – entrustee is entitled to it
b. Deficiency – entruster is entitled to it (entrustee to pay balance to
entruster)
IV. WAREHOUSE RECEIPTS LAW
Governing Law
Act No. 2137 (5 Feb 1912)
Act No. 3893, amended by RA 247 (Bonded Warehouse Act)

Purposes
1. To regulate the status, rights and liabilities of the parties in a
warehousing contract
2. To protect those who, in good faith and for value, acquire negotiable
warehouse receipts by negotiation
3. To render the title o, and right of possession of, property stored in
warehouses more easily convertible
4. To facilitate the use of warehouse receipts
Applicability
To ALL warehouses, public/private, bonded or not
Articles 1507-1520 of the Civil Code apply in all other cases where
receipts are NOT issued by a warehouseman.
*CBW Customs bonded warehouse; registered with the BOC
*CSW ________ Storage Warehouse
Definition of terms:
1. Warehouseman
person lawfully engaged in the business of storing goods for profit
only a warehouseman may issue warehouse receipts; those not issued
by a warehouseman are NOT warehouse receipts. (Sec. 1)
but a duly authorized officer or agent of a warehouseman may validly
issue a warehouse receipt (National Bank vs. Producer’s Warehouse
Association, January 9, 1922)
2. Warehouse
the building or place where goods are deposited and stored for profit
3. Warehouse receipts
written acknowledgement by a warehouseman that he has received
and holds certain goods therein described in store for the person to
whom it is issued; a written contract between the owner of the goods and
the warehouseman to pay the compensation for that service
4. Non-negotiable receipts
receipt in which it is stated that the goods received will be delivered to
the depositor, or to any other specified person
5. Negotiable receipts
receipt in which it is stated that the goods received will be delivered to
the bearer or to the order of any person named in such receipt
Functions of warehouse receipts
1. They are simple CONTRACTS evidencing the underlying contract of
deposit/carriage.
2. They are EVIDENCE of receipt of goods.
3. Under A.1636 of the New Civil Code, they are DOCUMENTS OF
TITLE to goods.
Degree of care required of a warehouseman in the safekeeping of
goods entrusted to him
The warehouseman is required to exercise that degree of care which a
reasonably careful man would exercise in regard to similar goods of his own.
Form
Generally, the warehouse receipt is not required to be in any particular
form. However it should contain the following:
1. Location of the warehouse where goods are stored
2. Date of issue of the receipt
3. Consecutive number of the receipts
4. Statements whether the goods received will be delivered to the bearer,
to a specified person, or to a specified person or his order
5. Rate of storage charges
6. Description of the goods or of the packages containing them
The mere fact that the goods deposited are incorrectly described does
not make ineffective the receipt, when the identity of the goods is fully
established by evidence. Its indorsement and delivery shall constitute a
sufficient transfer of the title of the goods. (American Foreign Banking
Corporation vs. Herridge, December 20, 1924)
7. Signature of the warehouseman which may be made by his authorized
agent
8. Warehouseman’s ownership of or interest in the goods
9. Statement of advances made and liabilities incurred
These are required for the protection of the depositor and those
succeeding to his rights.
If the warehouseman omits any of the required information and injury
is caused thereby to a person:
(a) the warehouseman shall be liable to the said person for ALL damages
caused by such omission
(b) the validity and negotiability of the receipt are NOT affected
(c) the contract is converted to ordinary deposit (Gonzales vs. Go Fiong
& Luzon Surety Co., August 30, 1958)
Inclusion of other terms
General Rule:
The warehouseman may insert any other terms and conditions.
Exceptions:
1. Those contrary to the provisions of the Warehouse Receipts Law
2. Those contrary to law, morals, good customs, public order or public
policy
3. Those exempting the warehouseman from liability for misdelivery or
for not giving statutory notice in case of sale of the goods
4. Those exempting the warehouseman from liability for negligence a. right of title to the goods of:

5. Those which may impair the obligation of the warehouseman to i. the person negotiating the receipt
exercise that degree of care in the safekeeping of goods entrusted to him ii. the person to whose order the goods were to be delivered

b. right to have the warehouseman directly obligated to hold

possession of the goods for him, as if the warehouseman directly
Negotiability of warehouse receipts
contracted with him
1. Warehouse receipts are NOT negotiable instruments under the
goods represented cannot be subject to attachment or levy by execution
Negotiable Instruments Law.
UNLESS in proper circumstances (Sec.49)
2. The warehouse receipt is negotiable under this Act; in the passage of
when more than one is issued for the same goods, the word
the warehouse receipts through the channels of commerce, the law
“duplicate” should be placed upon the face of every receipt, except on
regards the property which they describe as following them and gives to
the first one issued; otherwise, the warehouseman shall be liable to a
their regular transfer by endorsement the effect of manual delivery of the
holder for value even after delivery is made to the holder of the original
things specified in them.
receipt (Sec.6)
3. No provision shall be inserted in a negotiable receipt that it is
non-negotiable. Such provision, if inserted, shall be void.

Advantages of a negotiable receipt from a non-negotiable receipt

1. It protects a purchaser for value and in good faith

Negotiable Instruments
The subject is money
The instrument itself is the
object of value
Warehouse Receipt
The subject is merchandise
The goods are the object of
value
2. The goods covered by the receipt cannot be garnished or levied upon
under execution unless it is surrendered, impounded or its negotiation
enjoined;
3. In case of negotiation, the holder acquires the direct obligation of the
warehouseman to hold possession of the goods for him without notice to
such warehouseman.
4. The goods it covers are not subject to seller lien or stoppage in transit

Intermediate parties become Intermediate parties are NOT

secondarily liable liable for the Negotiation (Negotiable warehouse receipts)
warehouseman’s failure to
deliver the goods. A.How Negotiated

Deliberate alteration makes it Valid if altered BUT 1. DELIVERY, when the goods are deliverable to
null and void enforceable only in
a) the bearer, or
accordance with its original
b) a specified person or order, and the latter or a subsequent indorsee
tenor
indorses it in blank or to bearer
If originally a bearer Converted to an order
2. INDORSEMENT + DELIVERY
instrument, it will remain as instrument IF specially
such indorsed If the receipt is indorsed to a specified person, it becomes an order
receipt and negotiation can only be effected by the indorsement of such
Holder in due course may HDC obtains only the title
person in blank, to bearer or to another specified person
obtain a better title which the party negotiating
had over the goods Delivery alone is not sufficient
Effects of delivery without indorsement:

a) Transferee acquires title against transferor

Kinds of receipts a warehouseman may issue
b) Transferee can compel the transferor to complete the negotiation by
1. NON-NEGOTIABLE indorsement
c) Warehouseman has no direct obligation
one which provides that the goods will be delivered to the depositor or
to any other specified person 3. PLEDGE

should be stamped on its face “non-negotiable”; otherwise, a holder
believing it to be negotiable may treat it as such (Sec. 7)
acquired through transfer and assignment, NOT through negotiation;
vests the transferee with the ff. rights:
a. right of title to the goods, as against the transferor
b. right to notify the warehouseman of the transfer and acquire the
direct obligation of the warehouseman to hold the goods for him
goods represented can be subject to attachment or levy by
execution (Sec.42)
Negotiation of a receipt may also be by way of pledge; as to the legal
title to the property covered by a warehouse receipt, a pledge is on the
same footing as a vendee EXCEPT that the former is under obligation of
surrendering his title over the goods upon payment of the debt secured.
(BPI vs. Herridge, December 20, 1924)
BUT the pledgee or mortgagee does NOT automatically become the
owner of the goods, but merely retains the right to keep them and sell
them (with consent of the owner) so as to satisfy the obligation from the
proceeds (PNB vs. Sayo, July 9, 1998)
If the property is lost without the fault or negligence of the pledgee or
mortgagee, it is regarded as lost on account of the real owner, mortgagor
or pledgor

2. NEGOTIABLE
B. Who may negotiate
one which that the goods will be delivered to the bearer or to the order
1. Owner
of any person named in the receipt
2. Any person to whom the possession or custody of the receipt has been
failure to mark it as “negotiable” does NOT render it non-negotiable
entrusted by the owner IF
for as long as it contains words of negotiability (Sec. 5)
acquired through negotiation; vests the holder with the ff. rights:
a) by the terms of the receipt, the goods are deliverable to the order of
the person to whom the possession/custody of the receipt has been
entrusted, or
b) the receipt is in such form that it may be negotiated by delivery
3. Even a thief or fraud can negotiate the receipt if it is in such a form that
he need not forge any signature (bearer instrument).
C. Effects
1. Negotiation produces the effect of delivery: the transferee becomes the
owner of the goods.
2. Negotiation carries with it BOTH title to and possession of the
property.
D. Rights
1. Person to whom a negotiable receipt has been negotiated: (Sec41)
a. The title of the person negotiating the receipt over the goods covered
by the receipt;
b. The title of the person (depositor or owner) to whose order by the
terms of the receipt the goods were to be delivered over such goods; and
c. The direct obligation of the warehouseman to hold possession of the
goods for him, as if the warehouseman directly contracted with him.
2. Transferee of a negotiable receipt delivered WITHOUT endorsement:
(Sec43)
a. The right to the goods as against the transferor; and
b. The right to compel the transferor to indorse the receipt
The negotiation shall take effect as of the time when the endorsement is
actually made.
The endorsement of a receipt shall not make the endorser liable for any
failure on the part of the warehouseman or previous endorsers of the
receipt to fulfill their respective obligations. (Sec45)
E. Warranties of the Person Negotiating or Transferring
1. That the receipt is genuine
2. That he has legal right to negotiate/transfer it
3. That he has NO knowledge of defects that may impair the validity or
worth of the receipt
4. That he has a right to transfer title to the goods and that the goods are
merchantable or fit for a particular purpose whenever such warranties
would have been implied, if the contract of the parties had been to
transfer without a receipt of the goods represented thereby
The indorser does NOT warrant the warehouseman’s complicity with
the latter’s duties.
A holder for security who in good faith accepts payment of a debt does
NOT warrant:
a. The genuineness of the receipt
b. The quality or quantity of the goods described therein
F. Warranties in duplicate Receipt
Sec 15 provides that if the term “duplicate’ is indicated in the receipts it
warrants the ff:
a. That the duplicate is an accurate copy of the original receipt; and
b. Such original receipt is uncancelled at the date of the issue of the
duplicate
G. Effect of Vendor’s Lien
Where a negotiable receipt has been issued for the goods:
a. No seller’s lien or right of stoppage in transitu shall defeat the rights of
any purchaser for value in good faith to whom such receipt has been
negotiated whether it be prior or subsequent to the notification to the
warehouseman who issued such receipt;
b. The warehouseman shall NOT be obliged to deliver or justified in
delivering the goods to an unpaid seller unless the receipt is first
surrendered for cancellation.
Transfer (Non-negotiable warehouse receipts)
A. How Transferred/Assigned
Delivery to the transferee accompanied by a deed of assignment,
donation or other form of transfer
B. To Whom Delivered
1. Depositor
2. Any other specified person
C. Non-negotiable Mark
A non-negotiable receipt shall have plainly placed upon its face by the
warehouseman issuing it as “non-negotiable” or “not negotiable”
Failure to do so, the holder of the receipt believing it to be negotiable
may, AT HIS OPTION, treat it as imposing upon the warehouseman the
same liabilities he would have incurred had the receipt been negotiable
D. Rights of Transferee (Sec42)
1. The title to the goods as against the transferor;
2. The right to notify the warehouseman of the transfer thereof; and
3. The right, thereafter, to acquire the obligation of the warehouseman to
hold the goods for him.
The right of the transferee is not absolute as it is subject to the terms of
any agreement with the transferor. He merely steps into the shoes of the
transferor.
Rights of a warehouseman
1. To be paid
2. To exercise his lien on the goods deposited in case of non-payment
3. To refuse delivery in proper legal circumstances
Obligations of a warehouseman
A. To issue a warehouse receipt in the required form for goods received,
and mark them accordingly (i.e. non-negotiable, duplicate)
B. To exercise reasonable diligence towards such goods
C. To insure the goods in the following circumstances:
1. Where the law provides;
2. Where it was an inducement for the depositor to enter into the
contract;
3. Where it is an established practice
4. Where the warehouse receipt contains a representation to that effect
D. To give up the proper notice in case of sale of the goods, as provided
E. To NOT commingle the goods deposited UNLESS they are fungible
and of the same kind and grade (co-ownership applies)
F. To deliver the goods to the person lawfully entitled
 1. A warehouseman is bound to deliver the goods UPON A
DEMAND made either by:
a. The person lawfully entitled to the possession of the goods or his
agent (e.g. buyer in an auction sale, donee of the goods)
b. A person who is entitled to delivery by the terms of the
non-negotiable receipt or who has written authority from the
person so entitled either indorsed or written upon another paper
c. A person in possession of a negotiable receipt
2. Such demand must accompanied by:
a. an offer to satisfy the warehouseman’s lien
b. an offer to surrender the receipt, if negotiable with such
endorsements as would be necessary for negotiation of the receipts
c. a readiness and willingness to sign, when the goods are
delivered, an acknowledgment that the goods had been delivered
3. Ownership is NOT a defense for the refusal to deliver goods
When the warehouseman has rendered it beyond his power to deliver
the goods, demand may be dispensed with. (A.1169,NCC)
Refusal or failure to deliver: the burden shall be upon the
warehouseman to establish the existence of a lawful excuse for the
refusal.
Neither can the warehouseman, as a depositary for hire, set up an
adverse title in another as an excuse for his failure to deliver the property
to his bailor on demand. (Sec.19)
DOCTRINE OF ESTOPPEL:
The warehouseman cannot refuse to deliver the goods on the ground
that he has acquired title or right to the possession of the same unless
such title or right is derived:
a. Directly or indirectly from a transfer made by the depositor at
the time of the deposit for storage or subsequent thereto;
b. From the warehouseman’s lien. (Sec.16)
4. The warehouseman may legally refuse to deliver goods in the
following circumstances:
a. When the holder of the receipt does NOT satisfy the conditions
prescribed in Section 8 of the Act
b. When the warehouseman has legal title in himself on the goods,
such title or right being derived directly or indirectly from the
transfer made by the depositor at the time or subsequent to the
deposit for storage, or from the warehouseman’s lien (Sec.16)
c. If the warehouseman had been requested by a person lawfully
entitled to a right of property or possession in the goods NOT to
make delivery to any person (Sec.10)
d. If he had information that the delivery to be made was to one
NOT lawfully entitled to the possession of the goods (Sec.10)
e. Where the goods have already been lawfully sold to third
persons to satisfy the warehouseman’s lien; or disposed of because
of their perishable or hazardous nature (Sec.36)
f. In case of adverse claimants (Secs.17 and 18)
g. In the valid exercise of the warehouseman’s lien (Sec.31)
h. Delivery to a claimant with a better right
i. Attachment/levy of the goods by a creditor where the document
is surrendered/ impounded or its negotiation enjoined (Sec.25)
j. Where the document of title is attached by a creditor (Sec.26)
k. Failure was not due to any fault of the warehouseman (Sec.26)
G. To take up and cancel the warehouse receipt when the goods are
delivered
Liabilities of a warehouseman
A. Liability for misdelivery or conversion
1. A warehouseman would be liable for misdelivery or conversion if he
delivers the goods to one who is not in fact lawfully entitled to the
possession of the goods
Conversion is an unauthorized assumption and exercise of the right of
ownership over goods belonging to another through the alteration of
their condition or exclusion of the owner’s right.
2. He would also be liable for misdelivery even if he delivers to a person
holding a non-negotiable receipt or a negotiable receipt if prior to such
delivery he had either:
a. Been requested, by or on behalf of the person lawfully entitled to a
right or property or possession in the goods, not to make such
delivery; or
b. Had information that the delivery about to be made was to one not
lawfully entitled to the possession of the goods
3. Steps a warehouseman may take to protect him from misdelivery:
a. He could ascertain the validity of the adverse claim or to bring legal
proceedings to compel claimants to interplead (sec 17)
b. He may require the claimants to interplead (sec 18)
B. Liability for alteration of receipts
1. If the alteration is IMMATERIAL, that is, the tenor of the receipt is not
changed, whether fraudulent or not, authorized or not, the
warehouseman is liable on the altered receipt according to its original
tenor
2. If the alteration is MATERIAL, that is the tenor of the receipt is
changed, but authorized, the warehouseman is liable according to the
terms of the receipt as altered.
3. If the alteration is MATERIAL BUT INNOCENTLY MADE THOUGH
UNAUTHORIZED, the warehouseman is liable on the altered receipt
according to its original tenor; and
4. If the alteration is MATERIAL AND FRAUDULENTLY MADE, the
warehouseman is liable according to the original tenor of the receipt to a
purchaser of the receipt for value without notice and even to the alterer
and subsequent purchases with notice.
C. Liability for lost or destroyed receipts
If the receipt is claimed to have been lost or destroyed, it is essential that
the court shall pass upon the question and make sure that the receipt is
really lost or destroyed before the goods are delivered or a new receipt is
issued; a competent court may order the delivery of the goods only:
1. Upon proof of the loss or destruction of the receipt; and
2. Upon the giving of a bond with sufficient sureties to be approved by
the court
D. Liability as to duplicate
1. Failure to place the word “duplicate” in a duplicate receipt will make
the warehouseman liable for all the damages to anyone who purchased
such receipt believing it to be an original, even if the purchase be after
the delivery of the goods by the warehouseman to the holder of the
original receipt. (Sec 6)
2. He shall be guilty of a crime punishable by fine or imprisonment, or
both, if he issues a duplicate or additional negotiable receipt for goods
knowing that a former negotiable receipt for the same goods or any part
of then is outstanding or and uncancelled, without plainly placing upon
the face of the receipt the word duplicate, EXCEPT in the case of a lost or
destroyed receipt after proceedings.
E. Liability to rightful claimants
1. INTERPLEADER – this is a remedy given to the warehouseman in
case there is more than one person who claims title or possession of the
goods either as a defense to an action brought against him for
non-delivery or as an original suit; this would require the different
claimants to litigate among themselves.
2. Sec.18 provides that if someone other than the depositor or person
claiming has a claim to the title or possession of the goods, the
warehouseman shall be excused from liability for refusing to deliver the
goods until he has a reasonable time to ascertain the validity of the
adverse claim or bring legal proceedings to compel claimants to
interplead.
F. Liability for non-existence or misdescription of goods
GR: The warehouseman is under obligation to deliver the identical
property stored with him and if he fails to do so, he is liable directly to
the owner or holder of a receipt for damages.
EXC: If the description consists merely of marks or labels upon the
goods or upon the packages containing them, the warehouseman is not
liable even if the goods are not of the kind as indicated in the marks or
labels.
G. Liability for loss due to lack of care
GR: The warehouseman is required to exercise ordinary or reasonable
care in the custody of goods, that is, the care a reasonably careful owner
would exercise over similar goods of his own. This is the “diligence of a
good father of a family”
EXC: In the absence of any agreement to the contrary, the
warehouseman is not liable for any loss or injury to the goods which
could not have been avoided by the exercise of such care.
H. Liability to depositors of commingled goods
PURPOSE: to permit at all times the identification and redelivery of the
goods deposited
GR: A warehouseman shall keep the goods so far separate from goods
of other depositors, and from other goods of the same depositor for
which a separate receipt has been issued.
EXC:
1. If authorized by agreement or by custom, or
2. If the goods are fungible goods with other goods of the same kind and
grade.
a. The various depositors of the mingled goods shall own the entire mass
in common and each depositor shall be entitled to such portion as the
amount deposited by him bears to the whole.
b. The warehouseman shall be severally liable to each depositor for the
care and redelivery of his share of such mass to the same extent and
under the same circumstances as if the goods had been kept separate.
I. Liability for failure to mark a receipt intended to be non-negotiable as
“non-negotiable”
The holder of the receipt believing it to be negotiable may, at his
option, treat it as imposing upon the warehouseman the same liabilities
he would have incurred had the receipt been negotiable.
The “holder” referred herein cannot be the original holder because, as
the depositor, he is presumed to know whether he is getting a negotiable
or a non0negotiable receipt.
J. Failure to take up and cancel a negotiable receipt when goods are
delivered, OR failure to take up and cancel a negotiable receipt or to
place upon it a statement of what goods have been delivered, when the
goods are partly delivered
GR: The warehouseman shall be liable for failure to deliver the goods
to any one who purchases for value in good faith such receipt whether
the purchaser acquired title to the receipt before or after delivery of the
goods by the warehouseman. He shall also be guilty in such case of crime
punishable by fine or imprisonment.
Exceptions:
1. Where the goods have been lawfully sold to satisfy a warehouseman’s
lien; or
2. Where the goods have been lawfully sold or disposed of because of
their perishable or hazardous nature.
K. Liability for issuing receipts for goods not received by him or are not
under his actual control at the time of issuance of the receipt
L. Liability for issuing receipts for the warehouseman’s goods which do
not state that fact
A warehouseman shall be guilty of a crime punishable by fine or
imprisonment, or by both, if he issues a negotiable receipt for the same
goods deposited with or held by him of which he knows he is the owner,
solely or jointly or in common with others, if he fails to state such
ownership in the receipt
M. Liability for delivery of goods without obtaining negotiable receipt or
knowing that a negotiable receipt is outstanding and uncancelled
Exceptions:
1. Where the goods have been lawfully sold to satisfy a warehouseman’s
lien or
2. The goods have been lawfully sold or disposed of because of their
perishable or hazardous nature or
3. In case of lost or destroyed receipt after proceedings
Attachment or levy of goods deposited
A. Negotiable receipt
The warehouseman has the direct obligation to hold possession of the
goods for the original owner or for the person to whom the negotiable
receipt of title has been duly negotiated.(Sec 41)
GR: While in possession of such, the goods CANNOT be attached or
levied upon under an execution unless:
1. The document be first surrendered; or
2. The negotiation is enjoined;
3. The document is impounded by the court.
EXCEPTIONS:
1. If the person depositing is not the owner of the goods or one who has
no right to convey title to the goods binding upon the owner;
2. Actions for recovery or manual delivery of goods by the real owner;
3. Cases where the attachment is made before the issuance of the
negotiable receipt of title
 A creditor whose debtor is the owner of a negotiable receipt CAN
attach the negotiable receipt in the debtor’s possession and NOT the goods
covered by such receipt. (Sec.26) This provision expressly gives the court
full power to aid by injunction and otherwise a creditor seeking to get a
negotiable receipt covering such goods.
The prohibition is for the protection of the warehouseman since he
could be made liable to a subsequent purchaser for value in good faith.
B. Non-negotiable receipt
The goods can be attached, provided it is done prior to the notification
of the warehouseman of the transfer (Sec.42)
Absent such notice, both the warehouseman and the sheriff have a
right to assume that the goods are still owned by the person whose name
appears in the receipt.
The warehouseman’s lien
A. Extent
The warehouseman has a lien on goods deposited or on the proceeds
thereof in his hands for:
1. All lawful charges for storage and preservation of the goods
2. All lawful claims for money advanced, interest, insurance,
transportation, labor, weighing, cooperating and other charges or
expenses in relation to the goods
3. All reasonable charges and expenses for notice and advertisements of
sale, and
4. Sale of goods where default has been made in satisfying the
warehousing lien.
The warehouseman’s lien over the goods deposited with him is his
security for the payment of the charge, money advanced and other
expenses.
B. Against what enforced
The warehouseman’s lien can be enforced against:
1. The goods of the depositor who is liable to the warehouseman as
debtor whenever such goods are deposited; and
2. The goods of other persons stored by the depositor who is liable to the
warehouseman as debtor with authority to make a valid pledge.
Purpose of the law: to give the warehouseman a lien for charges
against goods of persons who are primarily liable for the charge
incurred, and who by their agreement create the relation of debtor and
creditor.
C. Remedies for enforcement
1. Refusing to deliver the goods until the lien is satisfied;
2. Causing the extrajudicial sale of the property and applying the
proceeds to the value of the lien; and
3. Filing a civil action for the unpaid charges or by way of counterclaim
in an action to recover the property from him.
Whether a warehouseman has or has not lien upon the goods, he is
entitled to all remedies allowed by law to a creditor against his debtor,
for the collection from the depositor of all the charges and advances
which the depositor has expressly or impliedly contracted with the
warehouseman to pay. (Sec 32)
D. Loss
The lien may be lost by:
1. Surrendering possession of goods
a warehouseman loses his lien upon the goods by voluntary
surrendering the possession without requiring payment of the lien, it
will be presumed that the lien has been waived or abandoned where the
warehouseman permits a depositor to remove the goods BUT NOT
where the property is taken without warehouseman’s consent or by force
2. Wrongfully refusing to deliver goods when demand is made with
which he is bound to comply under provisions of Sec.8
E. Satisfaction by sale
1. PROCEDURE: (Sec.33)
a. The warehouseman shall give a WRITTEN NOTICE to the person
on whose account the goods were held or to any person who has a
claim or interest in the goods. The notice shall be given either by
delivery in person or by registered mail to the last known place of
business or abode. The notice shall contain the following:
i. An itemized statement of the warehouseman’s claim, the sum
due and the date(s) when it became due.
ii. A brief description of the goods against which the lien exists.
iii. A demand that the amount of the claim shall be paid on or
before a day mentioned (not less than 10 days from the delivery of
the notice if personally delivered or from the time when the notice
should reach its destination if the notice is sent by mail)
iv. A statement that unless the claim is paid within the time
specified, the goods will be advertised for sale and sold by auction
at a specified time and place.
b. In accordance with the terms of the notice, a sale of the goods by
auction may be had to satisfy any valid claim of the warehouseman
for which he has a lien over the goods.
c. After the time for payment ahs elapsed, an advertisement of the
sale, describing the goods to be sold and stating the name of the
owner or person on whose account the goods has been held and the
time and place of the sale.
d. The ad shall be published once a week for two consecutive weeks
in a newspaper published in the place where the sale shall be held. It
can be in the place where the lien was acquired or if such place is
manifestly unsuitable, at the nearest suitable place.
If there is no newspaper published in such place, the advertisement
shall be posted at least 10 days before such sale in not less than six (6)
conspicuous places therein.
e. The sale shall be held not less than 15 days from the time of the first
publication.
f. From the proceeds of the sale the warehouseman shall satisfy his
lien including the reasonable charges of notice, advertisement and
sale.
g. The balance, if any, shall be held by the warehouseman, and
delivered on demand to the person to whom he would have been
bound to deliver the goods.
2. EFFECT
The warehouseman shall not thereafter be liable for failure to deliver
the goods to the depositor or owner of the goods even if such receipt be
negotiable.
In cases of perishable and hazardous goods, the warehouseman may
give notice to the owner, or to the person in whose name the goods are
stored, to satisfy the lien upon such goods and to remove them from the
warehouse. Failure to do so may entitle the warehouseman to sell the goods at
public or private sale without advertisements. In case he was unable to sell, he
may dispose of them in any lawful manner, and shall incur no liability by
reason thereof.
Perishable and hazardous goods are goods which by keeping will
deteriorate greatly in value, or by odor, leakage, inflammability or
explosive nature and will make warehouseman liable in case it will
injure other property.
Effect of subsequent negotiation by seller of a receipt
There is a duty upon the purchaser, mortgagee, or pledgee of goods for
which a negotiable receipt has been issued, to require the negotiation of the
receipt to him; otherwise, his failure will have the same effect as an
express authorization on his part to the seller, mortgagor or pledgor in
possession of such receipt to make any subsequent negotiation.
Criminal Offenses: Who are liable GENERAL BONDED WAREHOUSE RECEIPTS
WAREHOUSE ACT LAW
1. Warehouseman, or any officer, agent or servant of the warehouseman,
who issues or aids in issuing a receipt knowing that the goods have not Regulates and supervises Prescribes the mutual duties
actually been received or are not under his actual control at the time of warehouses which put up a and rights of a warehouseman
issuing of such receipt bond who issues warehouse
receipts, and his depositor;
LIABILITY: Imprisonment not exceeding 5 yrs or by a fine not covers all warehouses,
exceeding P10, 000.00, or by both. whether bonded or not

A warehouseman is a person A warehouseman is a person

engaged in the business of lawfully engaged in the
2. Warehouseman, or any officer, agent or servant of warehouseman, who
receiving commodity for business of storing goods for
fraudulently issues or aids in fraudulently issuing a receipt for goods
storage. profit
knowing that it contains any false statements

LIABILITY: Imprisonment not exceeding 1 yr, or by a fine not

exceeding P2,000.00, or by both.

3. Warehouseman, or any officer, agent or servant of warehouseman, Applicability

who issues or aids in issuing a duplicate or additional negotiable receipt for
goods knowing that a former negotiable receipt for the same goods is 1. Warehouseman engaged in the business of receiving commodity for
outstanding and uncancelled, without plainly placing “duplicate” storage,
(except in case of loss or destroyed receipts) 2. Including contracts or transactions wherein:
LIABILITY: Imprisonment not exceeding 5 yrs, or by a fine not
a. The warehouseman is obligated to return the very same commodity
exceeding P10,000.00, or by both.
delivered to him or to pay its value
b. The commodity delivered is to be milled for the owner thereof
c. The commodity delivered is commingled with the commodity
4. If there are goods deposited or held by the warehouseman as an
belonging to other persons, and the warehouseman is obligated to return
owner, either solely or jointly with others: that warehouseman, or any
commodity of the same kind or to pay its value
officer, agent or his servant, knowing such ownership who, issues or aids
in issuing a negotiable receipt not stating such ownership.

LIABILITY: Imprisonment not exceeding 1 yr, or by a fine not Commodities which may be stored in a bonded warehouse
exceeding P2,000.00, or by both.
Generally, these commodities could be any raw, processed,
manufactured or finished product or by-product, goods, article, or
merchandise, either domestic or of foreign production or origin, which
5. Warehouseman, or any officer, agent or servant of warehouseman,
may be traded or dealt in openly and legally.
who delivers goods out of the possession of such warehouseman, knowing that
Prohibited substances, the possession of which is prohibited by law,
a negotiable receipt is outstanding and uncancelled, without obtaining
may NOT be validly received for storage in a bonded warehouse.
the possession of such receipt at or before the time of delivery

LIABILITY: Imprisonment not exceeding 1 yr, or a fine not exceeding

P2,000.00, or by both. Bond required to be put by the warehouseman

1. The bond may either be cash or property bond or bond issued by a

6. Any person who deposits goods to which he has no title, or upon which
there is a lien or mortgage, and who takes, for such goods a negotiable receipt
which
he afterwards negotiates for value without disclosing his want of title or
existence of the lien or mortgage.
LIABILITY: Imprisonment not exceeding 1 yr, or by a fine not
exceeding P2,000.00, or by both.
duly authorized bonding company
2. The amount of the bond must not be less than 33 1/3% of the market
value of the maximum quantity of the commodity to be received by the
warehouseman.
3. It shall be conditioned as to respond for the market value of the
commodity actually delivered and received at any time by the
warehouseman in case the latter is unable to return the commodity or to
pay its value.

Duties of a bonded warehouseman

1. To secure a license from the Bureau of Domestic Trade (DTI);

2. To give the necessary bond;
GENERAL BONDED WAREHOUSE ACT 3. To insure the commodity received for storage against fire;
4. To receive for storage any commodity:

Purposes of the law
1. To protect depositors by giving then recourse in case of the insolvency
of the warehouseman against the bond filed by him
To achieve this purpose, any person who wants to engage in the
business of receiving commodities for storage is required by the Act to
first secure a license therefore from the Department of Trade and
Industry.
2. To regulate the business of receiving commodities for storage
3. To encourage the establishment of more warehouse
a. of the kind customarily stored by him in the warehouse,
b. so far as his license or the capacity of the warehouse will permit,
c. without making any discrimination between persons desiring to avail
themselves of warehouse facilities
A fine for double the market value of the commodity so received is
imposed in case of excess of the authorized quantity. (Sec.12)
5. To keep complete record of all commodities received by him, of the
receipts issued therefore, of the withdrawals, of the liquidation, and of
all receipts returned to and canceled by him;
6. To observe the rules and regulations of the Bureau of Domestic Trade
(DTI)
Right of a person injured by the breach by the warehouseman of any
of his obligation under the act:
He may sue on the bond put up by the warehouseman to recover the
damages he may have sustained on account of such breach.
In case the bond given is not sufficient to cover the full market value of
the commodity stored, he may sue on any property or assets of the
warehouseman not exempt by law from attachment and execution.
Offenses penalized under the act
A. Civil
- Breach of obligations secured by the bond
B. Criminal
1. Engaging in the business of receiving commodities for storage without
the proper license
2. Receiving a quantity of commodity greater that that specified in the
license of the warehouseman
3. Conniving or entering into a combination with an unlicensed
warehouseman for the purpose of avoiding compliance with the
requirement of obtaining a license before engaging in the business of
receiving commodities for storage
BANKING LAWS
THE NEW CENTRAL BANK ACT
RA 7653
June 14, 1993
Policy
maintenance of a central monetary authority (CMA)
Power of CMA
(a) function and operate as an independent and accountable body in the
discharge of its responsibilities concerning money, banking and credit
(b) enjoy fiscal and administrative autonomy.
Central Bank Def’n
A central bank is a bank that holds the cash reserves of a country’s
commercial banks, performs monetary services for the government,
issues bank notes, and makes funds available to commercial banks
 Every country has a central bank
Establishment and organization of Bangko Sentral ng Pilipinas
- The central Bank shall be the central monetary authority that shall
function and operate as an independent and accountable body corporate
in the discharge of its mandated responsibilities concerning money,
banking and credit.
- It is a government-owned-and-controlled corporation but it was created
as an autonomous body corporate governed by the provisions of its
charter (RA 265). It enjoys fiscal and administrative autonomy.( Sec1;
Chapter I )
RESPONSIBILITIES AND PRIMARY OBJECTIVES(Pillars)
1. Price Stability
2. Financial Stability
3. Efficient system for payment and settlements
(Sec 3; Chapter I)
Responsibilities:
1. Provide policy directions in the areas of money, banking and credit
2. Shall have supervision over the operations of banks; and
3. Exercise such regulatory powers as provided in this Act and other
pertinent laws over the operation of banks and pertinent laws over the
operations of finance companies and non-bank financial institution
performing quasi-banking functions.
Primary objectives:
1. Maintain price stability conducive to a balanced and sustainable
growth of the economy
2. Promote and maintain monetary stability and the convertibility of the
peso (it includes power to regulate no-dollar imports; owing to the
influence and effect that the same may and do have upon the stability of
our peso and its international value)
POWERS OF THE BANGKO SENTRAL
1. Supervisory Powers. The operations and activities of banks shall be
subject to supervision of the Bangko Sentral. It shall also have
supervision over the operations of and exercise regulatory powers over
quasi-banks, trust entities and other financial institutions which under
special laws are subject to Bangko Sentral supervision.
Quasi-banks shall refer to entities engaged in the borrowing of funds
through the issuance, endorsement or assignment with recourse or
acceptance of deposit substitutes for purposes of re-lending or
purchasing of receivables and other obligations
Deposit substitutes is defined as an alternative form of obtaining funds
from the public, other than deposits, through the issuance, endorsement,
or acceptance of debt instruments for the borrower's own account, for the
purpose of relending or purchasing of receivables and other obligations.
These instruments may include, but need not be limited to, bankers
acceptances, promissory notes, participations, certificates of assignment 4. The department head and the examiners of the appropriate
and similar instruments with recourse, and repurchase agreements. supervising and examining department are authorized to administer
oaths to any such person, employee, officer, or director of any such entity
and to compel the presentation or production of such books, documents,
papers or records that are reasonably necessary to ascertain the facts
Supervision shall include the following:
relative to the true functions and operations of such person or entity.
a. The issuance of rules of, conduct or the establishment standards of
operation for uniform application to all institutions or functions covered,
Failure or refusal to comply with the required presentation or
taking into consideration the distinctive character of the operations of
production of such books, documents, papers or records within a
institutions and the substantive similarities of specific functions to which
reasonable time shall subject the persons responsible therefore to the
such rules, modes or standards are to be applied
penal sanctions provided under the New Central Bank Act.
b. The conduct of examination to determine compliance with laws and
regulations if the circumstances so warrant as determined by the
Monetary Board 5. The Bangko Sentral shall, when examining a bank, have the authority
to examine an enterprise which is wholly or majority-owned or
c. Overseeing to ascertain that laws and regulations are complied with
controlled by the bank.
d. Regular investigation which shall not be oftener than once a year from
the last date of examination to determine whether an institution is
conducting its business on a safe or sound basis: Provided, That the 6. Phase Out of Bangko Sentral Powers Over Building and Loan
deficiencies/irregularities found by or discovered by an audit shall be Associations.
immediately addressed

e. Inquiring into the solvency and liquidity of the institution; or

f. Enforcing prompt corrective action.
2. The Monetary Board may prescribe ratios, ceilings, limitations, or
other forms of regulation on the different types of accounts and practices
of banks and quasi-banks which shall, to the extent feasible, conform to
internationally accepted standards, including of the Bank for
International Settlements (BIS).
Within a period of three (3) years from the effectivity of this Act, the
Bangko Sentral shall phase out and transfer its supervising and
regulatory powers over building and loan associations to the Home
Insurance and Guaranty Corporation which shall assume the same.
THE MONETARY BOARD
- shall exercise all the powers and functions of the Central Bank

The Monetary Board may exempt particular categories of transactions -governing body
from the abovementioned regulations, but not limited to:

1. Exceptional cases or
Composition of the monetary board
2. To enable a bank or quasi-bank under rehabilitation or during a
merger or consolidation to continue in business, with safety to its - 7 members appointed by the President of the Philippines for a term of 6
creditors, depositors and the general public. years

3. Authorize person or entity to engage in banking operations or
quasi-banking functions
No person or entity shall engage in banking operations or quasi-banking
functions without authority from the Bangko Sentral:
Provided, however, That an entity authorized by the Bangko Sentral to
perform universal or commercial banking functions shall likewise have
the authority to engage in quasi-banking functions.
- The seven members are:
a. Governor of Bangko Sentral – shall be the Chairman of the Monetary
Board; his appointment is subject to the confirmation by Commission of
Appointments
b. Members of the Cabinet – designated by the President of the
Philippines
c. 5 members who shall come from the private sector, all shall serve
full-term

Upon issuance of this authority, such person or entity may commence to - 3 shall have a term of 6 years
engage in banking operations or quasi-banking function and shall
- 2 shall have a term of 3 years
continue to do so unless such authority is sooner

1. Surrendered,
***No member of the Monetary Board may be reappointed more than
2. Annulled by the Bangko Sentral in accordance with this Act or other
once.
special laws.

3. Revoked,

4. Suspended
QUALIFICATIONS OF THE MEMBERS OF THE BOARD

1. must be a natural born citizen of the Philippines

Persons or entities found to be performing banking or quasi-banking
functions without authority from the Bangko Sentral shall be subject to 2. at least 40 yrs old for the Governor and at least 35 yrs old for the other
appropriate sanctions under the New Central Bank Act and other members
applicable laws.
3. of good moral character

4. of unquestionable integrity
5. of known probity and patriotism

6. with recognized competence in social and economic discipline

DISQUALIFICATIONS OF THE MEMBERS OF THE BOARD

1. Disqualified from being a director, officer, employee, consultant, and

lawyer, agent ore stockholder of any bank, quasi-bank or any other
institution subject to supervision or examination by the Bangko Sentral;

2. Members coming from private sector shall not hold any other public
office/public employment during their tenure;

3. Connected directly with any multilateral banking or financial

institution or has substantial interest in any private bank in the
Philippines within 1 year prior to his appointment;

4. Employed in any such institution within 2 years after expiration of his

term except when he serves as an official representative of the
Philippines to such institution.

REMOVAL

- the President may remove any member for the following reasons:

1. if the member is subsequently disqualified under the provision of this

Act;

2. if he is physically or mentally incapacitated that he cannot properly

discharge his duties and responsibilities and such incapacity lasted for
more than 6 months;

3. if the member is guilty of acts or operations which are of fraudulent or

illegal character or which are manifestly opposed to the aims and interest
of Bangko Sentral; or

4. if the member no longer possesses the qualification specified in this

Act.